Smartphone industry sales set to recover in 2020 after three years of decline

New 5G-enabled handsets and demand for foldable models will help boost growth

epa08046878 An exhibitor displays the prototype of a 5G smartphone developed by Sharp Corp, owned by Taiwan's Hon Hai Group, at the Future Tech exhibition in Taipei, Taiwan, 05 December 2019. The Sharp 5G cellphone will be launched in Japan in the first half of 2020 and sold in Taiwan in the latter half of 2020.  EPA/DAVID CHANG
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The smartphone industry will bounce back in 2020 after three consecutive years of declining sales, as new affordable fifth-generation (5G) handsets and the rising popularity of foldable phones boost the number of units sold, analysts say.

The global smartphone market, which is forecast to drop 1.4 per cent year-on-year in 2019, will grow almost 1.5 per cent next year with shipment volumes a little more than 1.4 billion, according to a projection by the International Data Corporation.

The US research company expects 190 million 5G smartphones shipments in 2020 – almost 14 per cent of total volumes, which significantly surpasses the first year of 4G shipments (2010) at 1.3 per cent.

“Both 5G and foldable devices are likely to remain nice-to-haves in 2020. As 5G deployments emerge towards the latter stages of next year. Foldable technology overcomes ongoing challenges around design, flexibility and battery life,” said Matthew Kendall, chief telecoms analyst at The Economist Intelligence Unit.

Samsung launched its first foldable phone – Galaxy Fold – in February this year. The world's largest phone maker spent nearly eight years developing the device, but had to postpone its global release until September after reviewers reported screen problems within days of use.

Following Samsung’s footsteps, Huawei also announced its first foldable phone, –Mate X – at the Mobile World Congress in February. Both devices are priced at more than Dh6,600.

"Once it [foldable phones] becomes slightly more accessible to the average consumer in terms of prices, it will drive the next boom in the smartphone market – globally and regionally," Nabila Popal, senior research manager for IDC's devices group for the Middle East, Africa and Turkey, told The National.

Foldable phones will offer an "undeniable major advantage and advancement from previous devices, to convince consumers to upgrade", she added.

The smartphone industry remained sluggish this year due to a slowdown in developed markets sales marked by a “longer [phone] replacement cycle, increasing sales of refurbished devices, lack of 5G iPhones and the US trade ban on Huawei”, Counterpoint research company in Hong Kong said in one of its latest reports.

However, bucking the global trend of market contraction, smartphone industry in GCC countries grew 16 per cent year-on-year in 2019, after a few years of sales contraction – 2017 and 2018 saw declines of 8.9 per cent and 11.9 per cent, respectively, according to IDC.

“We expect this trajectory of growth to continue in the GCC next year … but with a slower and more stable yearly growth rate of 4.1 per cent,” said Ms Popal.

US research company Gartner is more optimistic about smartphone market growth in 2020 than its counterparts. It projected an increase in global shipments of about 3 per cent next year.

"Driven by the availability of more 5G networks and supporting devices, we predict a good chance of recovery in 2020," Annette Zimmermann, research vice president at Gartner, told The National.

“There is not one thing that is really standing out at this moment. Consumers will keep looking for a combination of killer features and apps before upgrading to a new device.”

Ms Zimmermann forecast growth of close to 6 per cent in the Middle East and North Africa next year, followed by a 5 per cent growth in China – one of the biggest smartphone markets globally.

Western Europe will grow only marginally at about 1 per cent, she added.

Industry analysts say manufacturers and vendors need to be more innovative to attract new customers.

"There are around two billion people who still use feature phones globally. Even if 10 per cent of them upgrade to a smartphone next year, there will be close to 200 million new users … quite a significant number," said Tarun Pathak, associate director with Counterpoint.

Feature phones allow basic services such as WhatsApp messaging but lack the advanced functionalities of a smartphone.

“We also expect 5G-enabled phones from Apple in the last quarter of next year and that would certainly propel a huge number of existing iPhone users towards new 5G devices,” sad Mr Pathak.

“We have already seen the launch of a $300 5G phone … more economical devices will boost the overall smartphone market.”

Global smartphone shipments grew 3 per cent in the third quarter, according to US market researcher Strategy Analytics. This was the first quarter of positive growth in the past two years.

Samsung increased shipments of its smartphones in the period by 8 per cent a year and stayed on top with a 21.3 per cent market share. It was followed by Huawei with an 18.2 per cent share and Apple with 12.4 per cent.

The smartphone industry might be facing a saturation point in terms of features, but next year's devices are likely to empower more users to unlock faster connectivity as they become increasingly 5G-enabled, said Saleem Al Blooshi, chief technology officer at Emirates Integrated Telecommunications Company, also known as du.

“In 2019, we saw a surge in customer anticipation for more 5G-enabled devices,” said Mr Al Blooshi, adding that EITC is working closely with device partners “to ensure more people across the UAE can enjoy new capabilities via 5G in the coming years”.